FBX Index: Looking forward
Asia to the US remains extremely strong, with congestion backing up supply chains and stretching shipments out through into Q2. This implied uncertainty has started to price into our forward curves, with Cal 21 now sitting very wide at a $2,500 bid/ $3,500 offer on FBX 01 China/ East Asia to North America West Coast. Forward pricing has progressively pushed downward from Q2 onwards, however bearish sentiment is tempered by a highly supportive forward environment.
On the Asia to Europe routes, it appears that the market has passed its peak, with prices coming off at the end of February following relative stability, at least on FBX 11 China/ East Asia to North Europe.
On FBX 13 China/ East Asia to the Mediterranean, prices had collapsed from relative premiums earlier in the month, moving more in line with FBX 11. This has started to present opportunities for counterparties hedging along the Asia-Europe routes to use either FBX 13 or FBX 11, doubling up the pool of liquidity.
Much of the price action has been driven by global capacity issues, however anecdotally at least, congestion has alleviated substantially, driving more demand in FFAs as counterparties move out of crisis mode and start to plan for the future.
Much of the price action has been driven by global capacity issues, however anecdotally at least, congestion has alleviated substantially, driving more demand in FFAs as counterparties move out of crisis mode and start to plan for the future. We have even seen physical counterparties looking to trade spreads as a means to lower both risk and costs of prices over longer periods. Much of the firm interest lies in Q3 onwards, outside of the scope of what any liner or shipper can predict or contract with certainty in the physical market.
The recent attractiveness of FFAs revolves around an incredibly diverse contract structure between carriers, with long-term agreements clashing with uncertain volumes and forward spot prices. The use of index-based pricing has driven efficiency and transparency, however the FFA has been employed to offer price security without restricting businesses to the terms of a rigid physical agreement price.
About Peter Stallion, Head of Air and Containers, Freight Investor Services
Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry
Source: The Baltic Briefing